Bond yields hit new record lows as ECB purchases near

March 6, 2015

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Bond yields hit new record lows as ECB purchases near/AFP

By AGENCE FRANCE PRESSE, PARIS, Mar 6-Yields on bonds of southern eurozone countries touched record lows in secondary trading Friday, a day before the ECB is slated to begin 60 billion euros ($66 billion) in monthly purchases.

The ECB on Thursday announced it would begin on Monday its massive stimulus programme to ward off the threat of deflation, but which will push down investor returns on government debt as competition to buy bonds heats up.

In early trading on Friday the rate of return to investors on 10 year Italian bonds fell to a new record low of 1.259 percent, breaking the record it set Thursday after the ECB’s announcement.

The yield on 10 year Spanish bonds hit a record low of 1.234 percent and the return on 10 year Portugese debt struck 1.663 percent.

The eurozone crisis was in large part due to their bond yields of weaker southern eurozone states shooting up to prohibitively expensive levels when investors worried their finances and debt weren’t sustainable.

Government bond purchases by the central bank, known as a quantitative easing policy, is controversial in the eurozone as several countries, in particular Germany, view it as indirect financing of governments.

But the purchases are aimed to inject funds in the wider economy as it allows investors to sell their bonds and invest money elsewhere.

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